Microsoft, Google and the Bear

Major cellphone handset manufacturers are excited that the open source nature of Google's operating system, Anrdoid, will help them cut costs by drawing in a wider range of programming talent. They also appreciate how easy it is to customize Android to make handsets that are different from others in the market using the same software. But Robert J. Bach, president of Microsoft's entertainment and devices division, says, "Every Google phone works differently, and you have fragmentation." And indeed, that is a common worry among developers, who don't want their applications to be incompatible with certain phones that have unusual screen sizes or features. But then again, Windows Mobile, which has been around for nearly 10 years, already has that same problem, and one of Microsoft's chief goals in upcoming versions is to rein in the variations between Windows Mobile handsets. But even if Windows Mobile has flaws, Bach is right to wonder about Google's motives. Like PC makers, smartphone manufacturers are falling into two camps. Some—like Apple, R.I.M. and Palm—will write their own operating systems. Others—like Samsung, H.T.C. and Motorola—will get smartphone operating systems from other companies. Before taking over as chief executive of Google, Eric Schmidt battled Microsoft at Novel and Sun, and he has long put a high priority on making sure Google is never vulnerable to excess power in Redmond. In that light, Youssef H. Squali, an analyst with Jefferies, wrote recently that Google will be satisfied if Android simply prevents any company from having too much control over smartphones. "We believe Android is an insurance policy against any potential collusion from carriers, manufacturers and competitors to either block or downgrade Google services," he wrote. "Google is hoping to further fragment the OS market to avoid any concentration of power in the hands of one or two competitors." In other words, Android doesn't have to beat the iPhone. It just has to be better than Windows Mobile.